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Finding Common Ground Between the Financing Fault Lines

Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.

 Skoll Scholar and Oxford MBA Candidate 2016-17, Ashley Thomas, draws on this year’s Skoll World Forum theme in relation to social impact business models.

There is a fault line between models of international development financing. On one side, there is the traditional donor and philanthropic capital that utilises grant money to support projects. On the other side is the social enterprise space that seeks to create sustainable impact through revenue generation.  There has been a lot of excitement in utilising grant funding for social enterprises to build and tweak their business model, but to date there has been little appetite for true hybrid models of ongoing subsidies for social enterprises.

This is a conversation that I had in numerous sessions and coffees throughout Skoll World Forum. It was also one of the key themes from the session hosted by Mercy Corps and USAID on sharing the learnings from their investments in the Innovation Investment Alliance. There is a common ground emerging; these conversations are hinting at the start of innovative new business models that allow for hybrid grant and revenue streams.

The Problem:

Social enterprises are addressing market failures. They bring products or services to underserved markets, often at low margins, and often at high costs. However, market failures exist for a reason; many companies are realising that even at scale, high volume low margin products are not able to generate the revenues that are necessary to be sustainable. However, social enterprises often sell themselves on this vision- that with initial capital to pilot and build systems, they will be financially sustainable at scale.

The Solution:

Philanthropic capital- which does not require financial returns, can help bridge this fault line, and maximise the potential impact of social enterprises. This does not mean we should revert to the large scale unsustainable development models of the 1990’s, but use philanthropic capital as way of targeting the market failure and allowing social enterprises to maintain their focus on their mission and outcomes. This hybrid model is being utilised in the FundiFix hand pump repair service designed by Dr. Rob Hope out of the University of Oxford. The model uses monthly user subscription payments to pool capital to finance prompt hand pump repairs. However, the willingness to pay only accounts for 2/3 of the cost of the service, and the remaining cost is subsidised through grant funding. This is also used in much larger social enterprises.  Ella Gudwin from Vision Spring spoke about how their model has shifted from seeking to maintain cost recovery- and retailing glasses at increasingly higher prices, to minimising the “philanthropy per pair” and serving their target customer.  They were able to do this under a scaling innovation grant from USAID and Mercy Corps, demonstrating that donors are also recognising the need for the pivot into these hybrid models.

It is increasingly clear that there is not one single model for social enterprise, and a single-minded focus on achieving commercial sustainability may limit the impact. Innovative hybrid models that use the social enterprise ethos of cost effectiveness in combination with smart grant funding that can subsidise the product can address the market failures preventing social enterprises achieving impact at scale. There is immense opportunity to achieve scale and impact through creating this common ground.

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Philanthropy for a Fractured World

Forging Common Ground – Series of Oxford Student Insights to the Skoll World Forum 2017.

David Sanders, Oxford MBA at the Saïd Business School, gives his perspective on the Skoll World Forum session, “Philanthropy for a Fractured World”.

On the final morning of the 2017 Skoll World Forum, simultaneous panels were offered on Impact Investing and Philanthropy.  I debated whether to catch up on the latest from the former, with its sex appeal of “profit + purpose”, a proposed new kind of capitalism, or to return to the original solution for affecting positive change: strategic donations.

A simple realisation drew me to Philanthropy for a Fractured World:  the most pressing, extreme problems facing society today do not lend themselves to viable business models, but through giving, these issues can be remedied.

Foundations and family offices are increasingly seeking hybrid organisational models when deploying capital, and I expected the session on philanthropy to at least touch on this growing practice.  Much to my surprise, and relief, on the contrary, the panelists reminded the packed room that philanthropy has a unique, and extremely important role to play in the social impact space.

Panelists at the Skoll World Forum, from philanthropy and government, discuss the role of their organisations in an increasingly polarised society.

Panelists at the Skoll World Forum, from philanthropy and government, discuss the role of their organisations in an increasingly polarised society.

The speakers, who included Lillianne Ploumen from the Government of The Netherlands, Darren Walker from the Ford Foundation, Laleh Ispahani from Open Society Foundations and Pia Infante from the Whitman Institute, discussed their organisations’ respective responses to crises, with significant focus paid to the risks facing women and minorities in the U.S. under a Trump presidency.  Ms. Ploumen’s department has partnered on the #SheDecides campaign, which swiftly raised €183 million to help fill the gap in maternal health provisions following the president’s drastic cuts to Planned Parenthood services.  This initiative, from a foreign government to the U.S., is admirable, but indeed troublesome—it seems the U.S. is entering a period of international reliance for the protection of human rights.

Mr. Walker emphasised the importance of minority representation in leadership positions today, especially where racism and sexism persist, and he also cited specific concerns on the failure of the economy to deliver stable jobs to low-income populations.  These shortcomings, coupled with a shrinking government social mandate, escalates demand for Big Philanthropy.

While the panelists focused more on the role of philanthropy than they did on specific causes, a highlight of the conversation was a recognition that there are causes that span the political spectrum.  Disability issues and criminal justice-reform, to name two, are both values-based issues, and garner support from the right-leaning Koch brothers, and progressive institutions like Open Society Foundations.

The world of giving does grapple with some important questions, however, around its own identity and purpose.  As Mr. Walker acknowledged, philanthropists are incredibly privileged, and it is easy for practitioners to succumb to an ivory tower mentality.  One proposed solution to this, as posed by the distinguished moderator Marc Gunther from Nonprofit Circles, is to democratise the work.  Like shareholders of a public company, who convene regularly to take a voice in key decisions, should not beneficiaries to causes also be gathered to express their views to donors?

In the Trump era, the culture of giving in the U.S. plays an essential role for social progress and human protections.  And it seems, based on the views of those at the Skoll World Forum, philanthropy is stepping into its heightened role with a determined spirit.

Follow David: @DavidSandersUSA

 

Advancing Good Governance Seminar: Fancy Alliteration or Food for Action?

The Skoll Centre recently partnered with Linklaters, no rx Camfed, purchase and the Blavatnik School for Government to host the 1st annual seminar on Advancing Good Governance in International Development.  The theme this year was “accountability to the client.”

The spotlight focused on how organisations operating in the social sector can enhance responsiveness and accountability to its clients. But what does “client” really mean?  Are we talking beneficiaries, stakeholders, funders, partnering organisations? How do we make sure we are “accountable” to each of them, and all of them collectively, but which “them” do we put first?  This seminar was designed to explore and unpack precisely these complexities, and sparked some lively discussions.

Whether you are a social entrepreneur or policy maker, I think we all agree the field of international development, let alone achieving good governance within it, is complex.  However, there is hope. The seminar not only got folks talking, but went beyond providing food for thought and unveiled an effort to take action.  It put academics and practitioners in the same room and started to identify gaps and possible solutions/practices that need to be explored further.  These areas are being evaluated as we speak and a call for papers to address gaps in the existing literature is forthcoming (with a £20K stipend slated to go to the winner).

Of course a simple call for papers won’t solve the complexity of governance, but it is a start.  And it will serve as an impetus for the conversation until the second annual seminar next year.

The Expanding Impact Investing Ecosystem: ImpactAssets 50

This post was writen by Skoll Centre Director, diagnosis Pamela Hartigan.

If you are an investor who has been wooed by impact investing and are looking for solid deals, capsule where do you go?

That was the challenge faced by Ron Cordes, order a wealthy New York based entrepreneur who was faced with the prospect of conducting due diligence on a myriad of possible social investment deals – without the time or expertise to do so.  But rather than give up, as many frustrated investors might do, Ron sought the help of the Calvert Foundation and together, launched ImpactAssets last year with capital from Ron Cordes’ Foundation, the Rockefeller Foundation, and other leading philanthropic and financial services sponsors.

ImpactAssets is a non-profit financial services company (I know that sounds like an oxymoron, but then, think of OneWorld Health, the first US non-profit pharmaceutical company).  It combines both philanthropy and asset management to mobilize capital for social and environmental impact.  At present, it has current assets of US$60 million and offices in San Francisco, New York, Seattle and Bethesda, Maryland.

I happened to be in New York this week and took advantage of a brief respite from meeting- mania to have coffee with my long-time friend and social investment pioneer, Jed Emerson.  In catching up with one another’s professional and personal lives, Jed told me about his involvement in ImpactAssets – which  in addition to him, has drawn upon some of the “greats” in the impact investing field, including Tim Freundlich as its President and as its Chairman, Wayne Silby, the creator of the Calvert Fund and Foundation.

As it turned out, I was serendipitously in the city for the launch of ImpactAssets 50, s a very cool initiative.  In short, Cordes invited a group of impact investing experts, of which Jed is one, to review and select the top 50 fund managers who are taking the best of the for-profit and not-for-profit structures and blending them to yield social, environmental and financial returns.  Criteria for consideration in this blue ribbon group include over three years experience in the impact investing field, a minimum of US$5 million under management, and a demonstrated commitment to social/environmental impact at the portfolio level.

In this way, wealth management advisors have a list of places to start their due diligence in looking for funds for their clients to invest in or products to place in their portfolios.

The full list of the top 50 is available here, online or in pdf.

The launch of ImpactAssets 50 was feted in Ron’s lovely Park Avenue apartment – and it again underscored how despite our sense that this field is expanding, it is still very small.

So many old friends and familiar faces – Asad Mahmood from Deutsche Bank, Jan Piercy from Shorebank International, entrepreneur and philanthropist Josh Mailman, social entrepreneurs Felipe Vergara from Lunmi and Jordan Kassalow from Vision Spring, Anthony Bugg Levine from Rockefeller, Cathy Clark from Duke, and on and on.

It will be exciting to see how ImpactAssets evolves in the coming years, how many fund managers will vie for the privilege of being selected among its Top 50, and how many entrants are spawned to compete with this very promising venture.

SOCAP/Europe kicks off

Amsterdam plays host to the most popular party in Europe this week- the 2011 SOCAP/Europe Conference.

We’re thrilled that several of our Oxford MBA students and faculty have the opportunity to attend the event and help out our friends over at SOCAP.   They’ll be keeping us posted on all the latest and their perspectives on the gathering.

If you can’t make it to Amsterdam, be sure to follow along online and keep up with all the buzz on twitter at #socapeurope (Tweets are a’flying!). You can also watch the entire event via livestream.

We’re excited to see what comes out of the gathering – a few hours in, and already looks like exciting things. For one, check out the newly released Social Investment Manual by the Schwab Foundation.  Looks like a must read.

For more on the event, here’s Nikil Neelakantan, an Oxford MBA who is taking it all in live.

SOCAP, the conference at the intersection of money and meaning, came to Europe last night at the Beurs van Berlage in Amsterdam. Since I was volunteering at the conference, I was unable to witness the  keynote speech by HRH Princess Maxima, UN Secretary General’s Special Advocate for Inclusive Finance for Development.

The speech and the plenary session, “This moment in Europe, This moment in the World” were attended by a crowd of over 600 people.

Also, over 50 social entrepreneurs were  recognized for their achievements with the SOCAP scholarship. The Innovation Showcase was a venue for these entrepreneurs to present their work. The most popular one seemed to be a model of a Sustainable dance floor from Enviu, a Dutch social enterprise!

I am  definitely looking forward to tomorrow’s lineup of talks now!

Speaker Series: Kopernik on creating a technology marketplace for the poor

How do you get simple, affordable technology into the hands of people who need it most?

This is the question that drives Kopernik, an online marketplace connecting life-changing technologies with rural communities in developing countries.   While a plethora of new technology solutions are transforming the lives of the poor, many of these products never make it the last mile to the communities that need them most.

So, in steps Kopernik – connecting tech products to rural households via local NGO partners, crowdfunded by folks like you and me.

Today we hosted Toshi Nakamura, co-founder of Kopernik, who discussed this issue further as part of our Skoll Centre Speaker Series.  Toshi gave examples of some of these life-changing technologies, such as the well-known Life Straw (portable water filter),  SolarEar (solar-powered hearing aid charger), Q-drum (water rolling vessel) and D-light latern (solar light and mobile charger).  Some incredible technologies touched upon earlier this term during the great talk by Rada Basu on frugal innovation.

In terms of its model,  Kopernik seems to be exciting both technology producers (who view Kopernik as a critical distribution channel to new customers) as well as local NGOs (who are discovering this “supermarket” of technology innovations and purchasing them at a subsidized cost thanks to crowdsourced micro-investments).

What I found most interesting was Kopernik’s emphasis on transparency and accountability.  Through their “rapid impact assessment”, Kopernik is gaining real-time data on the use, efficiency and impact of these products.  These feedback loops enable them to get user opinion up and out to the public, and offer technology producers a plethora of market research to improve their products – and ultimately the lives of millions of people.

[youtube http://www.youtube.com/watch?v=Mbndd4WClmQ&w=560&h=349]